Tax Hikes Republicans Should Put Forward

If Republicans are serious about deficit reduction they will have to get serious not only about spending cuts but also raising revenues, and that means raising taxes. Now, some see the Republicans stated desire to maintain current income tax rates as being in competition with deficit reduction, this is not necessarily true. One can raise taxes without raising rates by broadening the taxable base (which has been significantly narrowed by a myriad of deductions, exclusions, and credits). Additionally one can tax different activities other work to raise revenues. If I were the Republicans I would propose that for every dollar of revenue raised the revenues be split evenly between deficit reduction and rate reduction. To raise revenues Republicans should propose the following:
Base Broadening Tax Modifications
1. Cap the Employer Exlusion today and set it at the average plan on the FEHB and index the cap to inflation (extend the tax treatment to those who buy their own healthcare, this will offset some of the revenues but will also be a good thing for small businesses and entrepeneurs.)
2. Cap the Mortgage Interest Deduction (currently you can deduct interest on a mortgage up to $1 million dollars, even for a home equity loan or a second home. Cap the deduction at $500,000 of interest and make home equity loans or second homes no longer applicable for the deduction). Don't index the cap.
3. Get rid of the State and Local Tax Deduction
4. Simplify all of the different tax advantaged savings programs- create one pre-tax savings vehicle and one after tax savings vehicle that everyone is eligible for- My suggestion would be a universal 401-k and a Roth IRA

Ancillary Revenues (New or Higher Existing Taxes)
1. Sin Taxes- the alcohol tax alone can raise significant revenues. On the flip side you would have fewer murders, rapes, and drunken driving deaths and injuries. Win/win.
2. Tobin Tax- Setting a modest financial transaction tax could raise a significant amount of revenue (up to $100 billion annually) while at the margins reducing market volatility
3. Gas Tax- Convert the gas tax from a fixed amount per gallon to an ad valorem basis. As the price of gas goes up so to will revenues (unless consumption of gas all of a suddent decreases much faster than the price of gas increases)
4. Carbon Tax- This is not happening but again, I think this is an area where Republicans could reorient the party in a sensible direction that is both economically efficient, distrubitionally neutral, and environmentally conscious. The tax could be very modest to begin with, though, consistently increasing over the years and plow the revenues to offset payroll taxes.
5. Bank Tax- Tax bank size. I don't know how much revenue this would raise, in an ideal world revenues would be close to nil as banks would be smaller and pose less of a systemic risk.
6. User Fees: Many agencies are funded in part or whole through user fees. These practices should be expanded.

In Case You Were Wondering...

what your municipal government's regulations regarding urban chicken coops was here is a handy link: http://home.centurytel.net/thecitychicken/chickenlaws.html

Can You Cut the Federal Workforce and Contractors?

Stan Collender says that if we cut the federal workforce and contractors that support them then some work is gonna have to be left undone. Mr. Collender has made this point a couple of times before. I think Stan Collender typically has very interesting and informative things to say about public policy but this is daft. I work in the government and on my floor alone you could send 25% of the people home (contractor and fed alike) without any loss in productivity. I am in my 20s and every where I turn I bump into somebody who is a GS-14 or GS-15 who has no real responsibility and is constantly figuring out ways to make themselves scarce. You don't lose anything by canning someone that isn't doing anything. And as it is virtually impossible to fire someone in the federal government (in my five years in the government the only thing someone that is not SES has been fired for is watching Porn). In theory contractors are supposed to serve as a workaround for managers but it usually doesn't work out that way. If you are an ineffective manager and you decide to augment your staff through contract because your employees are shirking what often happens is the contractors start to act like the feds. And because you have not disciplined your employees, because you are averse to confrontation or whatever the case may be, you don't ride your contractors. As such, you find lots of scenarios where we are spending $200k for someone to GS-7 Admin Assistant or Program Assistant type work just so we have the option of canning them but fail to exercise this option (a dear one) when appropriate. This is why you need to fire both feds and contractors. If you want to achieve greater productivity in the federal workforce there are two things that I believe are necessary:
1. More accountability, less job security (sometimes people should be fired, it is shameful how much deadweight taxpayers are asked to bear)
2. Higher Salaries at the Senior Management Level. I believe government is a good place to start salary wise but as you move up the career ladder it tops out too quickly. As a GS-15 or SES you can have a tremendous amount of responsibility yet your salary (starting $125k) isn't really competitive. Once you get to that level the traditional benefits of public sector work (a less hectic schedule/or more family friendly schedule) disappear but are not mitigated by a competitive salary. The only saving grace is that you don't have to do the sales work and proposals that you would have to do with a consulting firm. But you will end up on the hill, at trade associations, getting screamed at by stakeholders, etc.

Revenues As A Percentage of GDP

Historically revenues as a percentage of GDP have averaged around 18%. Obama's deficit commission is proposing to elevate the federal government's take to 21%. Liberals are howling that this is to low. That is a pretty significant tax hike, I don't see how you can dismiss such a proposal as unserious as it pertains to the revenue side. If anything it's ambitious.

Washington D.C.

I grew up in D.C., one of those rare natives you hear about. I actually think we as a folk, the natives that is, are a nice group of people. The problem with D.C. is that States expunge the greedy, selfish, narcissistic, and power crazed and they all come and settle here. To get a good feeling of this dynamic and the resulting culture you must read the comments on this article. Mind you, Sidwell Friends is probably the premier private school in D.C. and costs as much as a private college does.

hat tip: Marginal Revolution

Don't Repeal Obamacare, Reform It

Republicans are not going to succeed in repealing Obamacare without control of the Senate and Obama still there to veto any such repeal. As such, I don't think they should bother. While I belive Obamacare is an abomination in its present form it can and should be improved and there are ways of doing so that provide opportunities for bipartisan cooperation.

1. Funding: Both parties are giving lipservice to the deficit. However, Republicans have stated that they do not want to raise marginal rates. On its face this appears hypocritical but it needn't be. One way to raise a significant amount of revenue would be to cap the employer exemption on healthcare and align the cap with the cost of a High Deductible Health Plan (HDHP) plan. This would have a significant and immediate impact on cost control thus reducing spending in the out years while raising more than letting the only the upper tax bracket of the Bush Tax Cuts (as the White House has proposed) expire would. This would also accelerate the transition away from an employer provided system.

2. Minimum Benefits: The current health care bill's principal failure is that it defines the minimum benefit in at a very high level. As such, most routine predictable care is paid by an insurer. Adding a party to a transaction is inefficient but also promotes overconsumption as prices are not immediately evident to the consumer. By capping the employer exemption more people would opt for HDHPs where routine non-catastrophic care comes out of pocket but Obamacare has effectively outlawed such plans by defining a high minimum benefit level. Reducing the minimum benefit level to a naked HDHP will also make the individual mandate more effective as the penalty (while staying the same) would be more significant in relationship to the much lower premiums of HDHP plan. This would ameliorate the potential adverse selection spiral that Obamacare presently appears destined for.

3. Exchanges: Accelerate implementation of the exchanges, allow individuals to buy into them as opposed to employers. Let individuals buy across state lines tomorrow. These three steps together would get employers out of the health care game. If employers are no longer providing health care this should make employees at the bottom end of the wage scale significantly cheaper and help with the unemployment picture.

These three elements would preserve the basic architecture of Obamacare, maintain the coverage expansions all while reducing the present and future cost of implementation.

It Costs Two Cents to Make a Penny

Which to me indicates that it is no longer a useful medium of exchange. Be done with the penny.

Scary Quotes

"3. Social Security won't much change, keeping in mind that the number of elderly voters is growing larger every day. Given all their elderly white voters, the Republicans are already "the party of Medicare." The Democrats have become "the party of Medicaid." That locks three major programs into place, more or less. I don't hear serious talk of major cuts in defense spending."~Tyler Cowen, Marginal Revolution

Cross Country Train

"Why don't more of us take the train, and why doesn't Washington invest in the rails across the country to give more of the country, and not just the northeast corridor, the pleasure of the Acela, with speeds up to 150 mph between Boston and Washington?" -Peter King, SI

This is a really stupid question. Why would you want travel across the country on speeds of up to 150 mph on a train when you can do so on speeds up to 500 mph in a plane? Trains are a very enjoyable and efficient means of travel for trips under 250 miles (and probably 500 miles for the forseeable future depending on the price of gas).

Trompe L'Oeil Speedbump

TTAC calls this the 'creepiest application of the “trompe-l’œil speedbump”'. I have to agree. I wonder if this is really more effective than a physical speed bump or will it just cause a couple of older folks to have a cardiac arrest when they are under the false impression that they just ran over some girl chasing after a pink ball in a parking garage?

Unfortunate Names: DC School Edition

One of the rumored short listers to replace Michelle Rhee (assuming that Mayor-Elect Gray cans her) is a fellow by the name of Robert Bobb, or to be less formal, Bob Bobb. While Bobb-Squared's parents must have had contempt for their child, they did create an impressive fellow. Here's his wiki.

PeP Phraseology

The word chillax is a hybrid of chill and relax. Some would say this type of word is superflous but I would argue its adoption in the urban lexicon is what makes the English language rich. Thus my shock and horror when I looked up the proper definition on dictionary.com to find it did not have an entry.

Rosy Scenario's Secret Identity

I have discovered Rosy Scenario's secret identity. Her true name is Brad DeLong. Go read the whole post. Brad's logic is that right now it is obscenely cheap to borrow money and thus the potential long term budgetary costs are negligible (especially when you consider the potentially high social costs of structural long term unemployment). Brad looks at the borrowing as a one time cost and seems to assume no difficulties rolling over the debt. That is more what worries me.

That said, I largely agree that we should have taken advantage of the low borrowing rates and cheap labor available during a recession and that the first stimulus could have and should have been crafted better (50% of it was wasted on poorly constructed tax cuts). I would like to see such borrowing paired with future tax increases and spending cuts as early as 2 years out.

If the Bush administration had done any work whatsoever on planning for high speed rail, upgrading our grid, or implementing more mass transit (hell, just fixing what ought to have been fixed such as bridges) we would be in a much better situation right now. A lot of those unemployed construction workers could have been employed in a beneficial manner (at a discount). The taxpayer would reap the benefit of an upgraded infrastructure (with extremely low financing costs, likely lower if paired with a credible deficit reduction plan).

Al, We Hardly Knew Ya

If the smoking gun is to be believed, Al Gore likes handjobs from strangers. I don't see that as a problem. That said, I wonder what Sen. Gore's voting record was on these types of activities? I think if Al Gore had introduced legislation once upon a time called the Massage Parlor Freedom Act or the Happy Ending Act that that might have softened some of the rough edges of his public image. Personally, I am always much more comfortable with a Democrat whose views of limiting government intervention extend beyond abortion and sexual orientation.

BP and Unemployment

I do like the following idea from Robert Reich: "The President should order BP to establish a $5 billion clean-up fund, and immediately put America’s army of unemployed young people to work saving the Gulf coast. Call it the new Civilian Conservation Corps."

PeP Endorsement

I am endorsing Blogger cum Senate candidate Mickey Kaus (D-CA) to be California's next Senator. Given my previously established influence over the interwebs, I firmly believe that this endorsement will have an earth shattering impact (Kaus thinks that he will get about 3% of the vote, my endorsement should probably swing another 1%).

My rationale for endorsing Mickey Kaus is principally self-serving (somebody needs to set the precedent of a blogger becoming a big time politician so that it's not perceived as crazy when I jump straight to the white house without holding major office) but there are also more substantive reasons. One, I think it is important for someone who will not be immediately perceived as a bigot (thus, not a republican) to advance a sensible enforcement first-legalization later immigration policy. Aside from being better policy I think this would have a salutary impact on the immigration debate. Two, Kaus while liberal, would promote heterodoxy in general. Once other politicians saw how reporters had a lip lock on his ass for going against the grain on major issues other politicians and candidates will have an incentive at the margin to act out of envy and see personal gain in telling their leadership to go to hell. Again, I think this too would have a beneficial impact on policy debates and ultimately on policy outcomes. So with that said, I endorse Mickey Kaus for Senator.

Sensible Celebrity Quote

Normally I cringe when actors and such offer their politcal opinions as they're policy advice tends be daft. That said, this, from James Cameron, is very sensible:
'"The government really needs to have its own independent ability to go down there and image the site, survey the site and do its own investigation," he said.
"Because if you're not monitoring it independently, you're asking the perpetrator to give you the video of the crime scene," Cameron added.'

My Influence is Boundless

My call for a BP boycott is mushrooming. I am one of the most important people on the internet. See this article, it may not mention me by name, but it is really all about me. I get results.

Great Sentences

I loved this sentence from Politico (the quotes are from President Bill Clinton stumping for Blache Lincoln):
“'If you want to be used that way, have at it,’ he said to about 200 Democrats at Philander Smith College, speaking without notes for 20 minutes."

BP Sucks

Just a public service announcement. Go anywhere else but BP. Boycott BP.

How To Lose an Election: Vincent Gray Edition

Lesson 1: Do not oppose a popular program that your opponent supports, highlight said opposition, then only to knuckle under once you discover that it is popular within the same day.

Example: Vincent Gray earlier tried to strip funding from the streetcars in the d.c. budget and tried to use it as an issue to bash Mayor Adrian Fenty over the head with. Now this is stupid for many reasons. The streetcars are a good idea. They will enahnce connectivity in the core and are already spurring development. Wait, you ask, "how can nonexistent streetcars spur development?" Well, the streetcars are not running, however, a lot of construction has already occurred. The streets where the first phase of the streecar implementation is supposed to occur have already been dug up to set up the utilities, tracks have been laid for the majority of the routes, and actual streetcars have been purchased and delivered. This sends a signal to investors and potential homeowners. Potential homeowners might be willing to forgo amenities presently for rising property values later. Restaurants are willing to open up now to take advantage of cheap rents. Businesses relocate in anticipation of new foot traffic. So a large part of the work has been done and good amount of the money spent and to some degree the benefit has already started accruing. Unless you think that it is a foolish project it would make no sense to terminate it at this point. Anyhow, apparently Vincent Gray came to this same conclusion after half the city called his office in an uproar (in his defense, the majority of the council voted with him to strip out the funding, it was 11-2 vote- but they were not running for mayor).

"The Battle"

I agree with Bryan Caplan's take on Arthur Brooks new book; I wish I agreed with the premise but I think it is absurd. Brooks is arguing that 2/3rds of Americans are solid free enterprise folks but the other Social Democratic 1/3rd has managed to capture all influence and power and steer the country towards sclerosis (read: Obamacare). I don't think the median voter has all that coherent a political ideology. I think at the federal level politics seems to large, distant and abstract to really have any influence. That Americans are at heart more libertarian is probably true in relationship to the average European but Americans like a lot of interventionism too.

Massachusets: Our Health Care Future

It is rare in the policy realm where we can refer to a natural experiment. Massachussets is one such example and what this portends for the nation's future fiscal health is bleak. I think this quote from Megan McArdle sums up the issues with both the Massuchussets universal plan and Obamacare: "It's hard to simultaneously expand demand, while lowering the incentives for supply (i.e. Medicare reimbursements), without having some pretty dramatic mismatches between the two."

Two Sides of the Same Coin: Excessive Spending/Insufficient Revenue

The Center of American Progress has an interesting little bulletin documenting that Greece was not extraordinary in its spending but rather in its lack of revenues which were far below the average for Eurozone members. The bulletin then goes on to state that this notion of excessive spending being the cause of the Greece's demise is a myth. Their argument relies on two basic observations- Greece was close the median amongst Eurozone memers in terms of spending in relationship to GDP and Greece was at the bottom amongst Eurozone members in terms of revenues. I actually get their argument. They are making a technical argument that if Greece had a more efficient tax system they would have collected a similar ratio of revenues to GDP then in theory their fiscal deficit would be nowhere near what it is now.

In reality this argument is stupid. It would be like me saying: "The problem is not that my lifestyle outpaces my means, but rather I am not paid enough". Both statements in that sentence are saying the same thing but from different directions. Greece didn't have an efficient tax system like the median member of the Eurozone, which would lead to the obvious conclusion that it could not afford the median member of the Eurozone's spending habits. That it did spend thusly indicates that in fact, Greece's spending was excessive. There is no such thing as a spending problem that isn't a revenue problem or vice versa. In the end it is question of making tradeoffs which nobody can postpone indefinitely. That is the lesson I hope, but doubt, our lawmakers will take from Greece.

Public Sector Wages

Though it pains me to say this as a civil servant I think it is absurd that public sector wages have not been reduced or at the least frozen. If private sector wages, which when taxed are fund to public sector wages, stagnate or fall it would seem to me that public sector wages should similarly be reduced or cut. While I recognize stimulus was necessary (though I thought it was wet pile of dog shit), as the economy rebounds we will need to start acting aggressively on budget deficits. Cutting salaries is obviously a small step but it should be among the tools available.

The Next Global Depression

This from Tyler Cowen: "6. Basically the ECB is monetizing bad government debt claims." I think the net result of all this will be that Northern European governments and banks will be able to paper over Southern European's debts for a time but the cumulative result is that moral hazard has become more pronounced and global in nature. Increasingly it seems that the counter measures to this recession will be the proximate cause for a global depression.

Great Column from Ken Rogoff

Ken Rogoff has been beating the drum for a while that the financial crisis is a precursor to a Sovereign Debt crisis and he appears to be right. Here is a very informative column in the FT.

Ezra Klein Has a Stupid Post on Frannie

This post from Ezra Klein seems particularly daft. Ezra Klein is going to great pains to distinguish Frannie from the rest of the financial world due to the fact that Frannie deals with housing and how thus Frannie should be dealt with in a separate housing bill not the FinReg. However, the impetus for the FinReg bill is in large part to prevent another "Great Recession". A proximate cause for the current recession was a bubble induced by the financing of housing of which Frannie where major players (though contributors, contrary to absurd claims on the right, not the cause of the current mess). The only valid point Klein makes is that Republicans are proposing a stupid policy which this day and age is the same as saying the sky is blue.

Humor from Andy Stern

"It is the greatest middle-class, job-creating mechanism that we have ever had in America that doesn't cost tax payers a dime."

This comes from an interview with Ezra Klein. Naturally, Mr. Klein let the comment stand. His salary should really be considered a contribution from the Washington Post to the DNC and the unions.

Voucher Fail?

Liberals appear to be happily stomping on what they presume to be the tomb of the voucher movement. This celebration is predicated on the failure of vouchers to be the silver bullet for Milwaukee's educational needs. The Milwaukee voucher pilot demonstrated modest gains at a cost per pupil less than than public schools average expenditure for student. It just seems odd to label something as an outright failure when it yields a slightly better product at a lower cost. Most folks would call that an improvement, not a panacea or silver bullet, but an improvement.

WTF!?!?!

McNabb is a Redskin?

Will the GOP Remain the Old White Crusty Dude Party in Perpetuity

Not necessarily says Gene Healy:

"Yet, here’s an interesting fact: Recent Census Bureau figures predict that the working-age population will be 55 percent minority by midcentury. It may be hard to imagine the Tea Party movement becoming a Rainbow Coalition. But it’s even harder to believe that minority voters will enjoy paying for the (mostly white) baby boomers’ retirement and health care while they’re working to support their own families."

That's an interesting thought but I think the GOP will need to be crushed harder before it decides it needs to market itself towards a more diverse array of voters. Given that this midterm election is going to be a positive one for the GOP it is unlikely that such a change will occur anytime soon.

Gary Becker gets to the biggest aspect of our cost growth in my view- insulation from out of pocket spending-

"Here in the United States," Mr. Becker says, "we spend about 17% of our GDP on health care, but out-of-pocket expenses make up only about 12% of total health-care spending. In Switzerland, where they spend only 11% of GDP on health care, their out-of-pocket expenses equal about 31% of total spending. The difference between 12% and 31% is huge. Once people begin spending substantial sums from their own pockets, they become willing to shop around. Ordinary market incentives begin to operate. A good bill would have encouraged that."

Health Care Passes

Republicans lost, I would argue so did our nation's finances. Things Republicans should focus on in the next congress on improving health care and making it affordable long term:
1. Change the definition of the minimum benefit to HDHP
2. As part of tax reform cap the employer exclusion
3. Enable the purchase of insurance across state lines

Student Loan Reform and Health Care bundled Together

I find this ironic because the methods of financing both higher education and health care are in a general sense quite similar (3rd party payment) and both have exhibited higher than average cost growth without delivering superior outcomes. And the legislation being proposed for both appear to do little to arrest the current trend but at best will reset the baseline a little lower.

Note: The student loan reform proposes to make the government a direct lender to students. This will reduce the interest rates of the loans as they will have to cover for the rate of default but not profit. However, if the interest rates are lower then students can borrow more thus enabling Universities to charge higher tuition thus necessitating greater indebtedness yet from their students. Rinse and repeat so the cycle goes. The only thing that has changed is there isn't a middle man getting a take and for the purposes of reducing public corruption alone that is all to the good (though, during the Clinton years banks had to bid in order to provide lending services which made it a much more transparent and efficient operation). On a positive note the bill does propose plowing some of those savings (a meager amount as most of the savings are used to offset the health care bill) into Pell Grants.

Worst Bio for A Senator

Risk Modeler for AIG? CEO of Lehman Brothers? How about Chief Economist for Bear Stearns? Yes, the former Chief Economist of Bear Stearns, David Malpass, major housing bubble Pollyanna is gearing up for a Senate run. In New York, this background may be overcome but in every other state in the union I would think his background would be an insurmountable obstacle.

Orrin Hatch Has a Very Misleading Op-Ed

Orrin Hatch argues that using reconciliation for health care would be a travesty for democracy. I think the end result of passing health care would be disastrous but not for procedural reasons. The op-ed is misleading as he conveys that broader health care reform would be enacted using reconciliation. This is false. Reconciliation would be used to change a bill that has already been voted on by the Senate and got a supermajority. Reconciliation would only affect those measures that directly impact the budget, such as subsidy levels and revenue provisions. Reconciliation is used to this effect regularly. Republicans used it regrettably with the Medicare Plan D. Again, I am no fan of the health care reform bill but this op-ed is plainly disingenious.

Postal Service

It looks like they are going to cut their Saturday deliveries. I know it is a popular past time to complain about the US Postal Service but I have always been impressed with their service. That said, the only time I am reliant on the post office is for netflix. I am guessing at this point the Post Office's relevance is similarly diminished for most people. Couldn't we shut it down?

Was the Senate's Makeup Solely a Political Bargain

Thus claims Ezra Klein:
"Finally, Will accuses liberals who are not sufficiently respectful of the Senate's undemocratic nature of believing the Founders either "dolts or knaves." This is nonsense. The Founders were trying to entice large states and small states alike into an uncertain union. They solved it as best they could. And as part of their solution, they decided that the Senate should be appointed, not elected."

This is certainly true to some extent, however, verily overstated. The disparate composition of Senate and House are largely a reflection of a balancing act our founders sought to strike between preventing the ascension of a tyrant and mob rule.

Question About Toyota

Any chance the reason the gummint is slamming Toyota has more to do with Government ownership of GM as opposed to safety issues?

More Insurance Equals Better Insurance

This is the underlying premise of health care reform, that we need to further insulate consumers from costs of their health care. I come from the opposite premise; we need to insure against catastrophe and for the most of the population leave it to them to cover predictable expenses. In every other avenue of life, we do not buy a financial product whose sole purpose is to add parties to a predictable transaction. Why should health care be different?

Who Needs the Public Option

I think Obamacare is an Obamanation but it amuses me that progressives find the absence of a public option to be so disheartening. The legislation will force insurers to issue a policy to all that want one, forbids any price differentiation based on risk, guarantees renewal, defines minimum benefit levels, and now effectively establishes price caps. Insurance companies will effectively be public utilities. The only distinguishing factor between insurance companies and the public option would be the statutory authority to use medicare reimbursement rates.

CBO Scuttebutt

One of the things that will be interesting to see with the President's new health care proposal (this is supposed to be a compromise between the Senate and House bills) is how the CBO treats it. At first blush it appears that the revenue and subsidy changes are modest and should only inflate the bill's 10 year budget number slightly. However, in the president's proposal the government would obtain the authority to reject rate hikes by insurers. This coupled with all of the other changes in the bill would in effect reduce insurers to public utilities. It is conceivable that the CBO would decide that premiums paid should thus be recorded on budget thus massively inflating the budget number.

The Bachelor Reunion Show Liveblogging

It's my dirty little secret, I watch the Bachelor. My fondness for the show has an inverse relationship with the douchebagginess of the season's bachelor. This season features air line pilot Jake Pavelka, arguably the biggest douche to ever walk the earth. So I am loving this season.

Anyhow, here's my prediction for the Season finale: Jake picks Vienna. Upon her selection, a sex tape of Vienna makes it onto the internets. Jake reveals in the season wrap up show that Vienna gave him the herp but that he hopes that they will make it through it.

Bitch Set Me Up Volume 87

Marion Barry has been accused of self-dealing for the umpteenth time. How shocking!

Salinger and Sex

I've come across two really interesting essays on the sexual character of Salinger's published and published-but-rigorously-out-of-print writings. This post on the LRB blog offers a theory of the real meaning of "bananafish". This article in Slate extrapolates from a little known hot and sexy essay that Salinger wanted to write about sex and perhaps did until he died. Fascinating.

SOTU Thoughts

President Obama will give the SOTU in five minutes. It will be very interesting to see what remarks he has on health care reform. I can see him going one of three ways: 1. Trying to sell reform and implore the House to finish up the job; 2. Also suggest a path to a scaled down health care bill; 3. Not mentioning it. My guess is he will go with option 1. There is some discussion bubbling up that the House would be willing to vote on the Senate bill if the Senate took up amendments to the Senate version in Reconciliation. The other big expectations are that Obama will publicly push Congress to repeal "Don't Ask, Don't Tell". Obama is also expected to announce a spending freeze in discretionary spending. That is small beer. The other issue to watch out for is financial reform.

The Apple iPad

It will f$%k you up for life. Just Kidding. I don't really get it. It seems like a netbook with a little more content. It looks really pretty and some people think it will be the neatest thing since sliced bread. My track record is horrible on these things.

note: I don't think my predictions were totally off base about the smart car. They haven't taken the world by storm but they are common enough to be considered mainstream (to the extent that driving a clown car can be considered mainstream).

More Proof that NoVa is better than MoCo

Courtesy of Urban Turf.

PeP Link Farm

Saab is officially undead.

Union membership dropped 10% last year. Which makes it all the more galling that the House won't vote on the senate health care bill so as to appease unions (why appease them when they are disappearing).

Bruce Bartlett discusses Obama's plan for a discretionary budget freeze- partying like it's 1937 again.

Ezra Klein wonders why Obama is proposing the discretionary budget freeze in a vacuum as opposed to using it as a negotiating ploy. I wonder myself, seems like an unforced error.

Garret Jones has a provocative twitter- If you want to decrease spending increase earmarks.

Chuck Schumer and Orrin Hatch have an op-ed in the NY Times proposing a temporary cut in the employer portion of the payroll tax to stimulate employment. This is something we should have done with the first stimulus.

Ezra Klein has a sort of stupid take on the Hatch proposal, but not completely wrong. He sees the virtue of the proposal as harnessing the rich's irrational desire to avoid taxes. I think most would simply note that its chief virtue is reducing the cost of hiring someone. I suppose though they are two sides of the same coin.

Raghuram Rajan proposes eliminating deposit insurance. It's certainly a provocative proposal.

My Modest, Scaled Down Bipartisan Healthcare Plan

Step 1- Revenues and moving away from the employer-based system-

I propose a full phase out of the employer exclusion for those with incomes above $125 k for an individual/ $250 k for a household. This would only yield a modest amount of revenue assuming a static model. There aren't all that many households that would fall into bracket, however, those that do tend to be upper middle management. I think once hr directors across the country see their tax liability go up anywhere from $2-5k that they may rethink the virtues of having their company "provide" their healthcare. This would not cause every company to cash out their fringe benefits and only pay cash wages but it would significantly shift things in this direction.

Now, obviously, getting rid of the employer exclusion would transform compensation norms away from non-taxable benefits to taxable wages much more quickly, but this is probably not politically possible. One could argue that touching the employer exclusion is basically impossible as evidenced by the fact that an incredibly weak excise tax (this was basically a roundabout way of gradually eroding the employer exclusion-really gradually, like decades) sent labor into a tizzy and is arguably the proximate cause for the failure of current health reform bill (that and the fact that house democrats are apparently stupid and timid). I think what distinguishes this proposal is that labor's ox is not getting gored by and large. Most union members do make good salaries but not on this order. Rather, it is a soak the rich proposal which usually is politically palatable. The strength of the proposal is not that the rich will be successfully soaked but in attempting to avoid being soaked explicitly will drastically change the way companies pay their employees. Far fetched, I don't think so.

Step 2- Dump people into the individual market and let them buy insurance across state lines

I know, the individual insurance market is horrible, yadda yadda yadda. One of the basic problems with the individual market is that many states suffer from minimum benefit creep. If you live in New York or some other states where there are very generous mandated benefits chances are your choice is between buying a policy that is exorbitantly expensive and going uninsured. Given that you need food and shelter, the choice most people make is to go uninsured. In choosing between protecting folks from catastrophe on one side and providing insurance that has a no-copay for acupuncture treatments on the other side, I think the providing protection against catastrophic bit is more important.

Why propose buying across state lines as opposed to a national exchange? National exchanges, while a great idea in theory, are likely to be a cess pool for rent seeking. The notion of a basic catastrophic plan being offered unmolested by gentle nudges from the hill (in response to contributions from the AMA) is simply inconceivable. One could counter that without national exchanges, buying across state lines will promulgate a regulatory race to the bottom. Yes, this is a feature of my plan, not a bug (within reason, addressed later in the blog). In the end, my underlying assumption is that we insure ourselves in a perverse manner, and are incentivized to do so by tax incentives. I don't think it is necessary to add third and fourth parties to a simple transaction covering a predictable expense. Thus, my optimal insurance plan would be a pure high deductible plan where you pay cash directly to the provider until you hit the deductible where the insurer would take over (as the deductible would be around $2,500 for an individual the likelihood that you would hit it in a given year is very low). By going the federalism route such a insurance product is more likely to survive.

Step 3. Mandate a couple of insurance reforms- no rescission, guaranteed issue

The danger of buying across state lines and the attendant race to the bottom is the prospect of incentivizing rescission. Ban it, problem solved. This would make premiums more expensive, however...

Step 4. A Federal Catastrophic Reinsurance Plan

People with pre-existing conditions are basically uninsurable. I liked John Kerry's proposal during the 2004 campaign for catastrophic reinsurance. The basic contours of his plan was that after a certain threshold (I think it was $75k) the government would pay half the cost. I wouldn't touch community rating however as it does away with the one thing insurers do well, price risk(never mind that whole AIG thing, nothing to see here). If there was a federal catastrophic reinsurance plan insurers wouldn't have the incentive, or nearly as much of one to screen for pre-existing conditions, but they would have an incentive to price according to certain unhealthy behaviors- like smoking.

Step 5. Use revenues from step 1 to provide a refundable tax credit to those under 200% of the poverty line in amount sufficient to cover the premium and 75% of the deductible. Phase out the deductible contribution and premium coverage by 350% above the poverty level.

Step 6. An individual mandate. Again, if people want to blow their nonrefundable tax credit on crack that is fine with me, but they should have to pay a penalty. A HDHP by itself in VA (my lovely home state) is about $1500 per annum. A penalty of $500 would probably incent most to go ahead an buy the insurance.

Sidebar- Federalize medicaid and get rid of the State and Local tax deduction.

This plan would be considerably less expensive than the currently proposed one, would do more to reform the system, and in the long run would have greater likelihood of containing costs. It would probably be disruptive though.

Volt Coming To D.C.

D.C. will be joining Michigan and California as the first markets where the Chevy Volt will be sold.

Beating a Dead Horse

"In its present form without any changes I don't think it's possible to pass the Senate bill in the House," Pelosi said, adding, "I don't see the votes for it at this time."

This is amazing to me.

Learning to Love Glass-Steagall All Over Again

President Obama appears to be pushing for financial reform and it looks like he has shifted directions in a positive direction (away from the influence of Geithner and Summers and towards Paul Volcker). The principle objective of the reform seems to be to walk back from the Too Big to Fail doctrine and to fashion a new Glass-Steagall.

Health Care Reform is Dead

Labor is throwing a fuss about the excise tax and has now declared opposition to the Senate bill.

I think this effectively kills the reform effort. Even with Brown's election the house could vote on the Senate bill that has passed exactly as it was written and pass it into law (the ping-pong route). This would obviate the need for an additional senate cloture vote that would be necessary if the bill went to conference, which became increasingly important as of yesterday when the Democrats lost their 60th vote. However, now that labor is opposing the senate bill this makes ping pong route unlikely.

The Senate could try to craft new legislation but it no longer has the 60 votes unless it is able to turn a republican or two. Obviously this raises Olympia Snowe's importance. The important question is will Olympia Snowe be willing to ditch the excise tax and embrace a revenue measure that is likely to pass in the house (such as a surcharge on top-earners). I view this as unlikely.

I still think some bill will be passed that is called health care reform but it will be substantially less ambitious.

Playoff Blogging

I think Neil Rackers is gong to be looking for a new job.

Pricing Transparency in Health Care

Matt Yglesias, normally super intelligent blogger, has made a breathtakingly stupid argument against the potential efficacy of pricing transparency in health care:

"I went to the Maine version of this idea and decided to pretend that I was living at my dad’s summer house in North Brooklin, ME and was considering my hospital options. It turns out that the closest place to get a knee MRI costs $1,550 and is a 40 minute drive to Ellsworth. There are two slightly cheaper options in Bangor—$1,159 or $1,160—but that’s more like a 75-80 minute drive. So the competition in this market is not very fierce. Bangor is the second-largest city in the state; it’s not convenient to get there from Brooklin, and even there you only have two options. Possibly not the best test case for these ideas."

An additional hour of driving would save the hypothetical patient $350. How many jobs pay you $350 per hour? Unless you work for Goldman Sachs, work for KPMG fudging Goldman Sachs books, or are a lawyer helping Goldman Sachs fudge their financial statements, very few. The problem is twofold: 1) Most people lack the information to comparison shop (health care reform should remedy this), and 2) people largely lack the incentive to use that information to economize (health care reform will not remedy this, rather it will exacerbate this trend). Presently people do not have the incentive to economize as they are not directly paying for the procedure. Rather, the insurer is paying for the procedure and then passing on the additional cost in the form of higher premiums. If people were exposed to the additional cost then they would have an incentive to economize it would drive prices down and also premiums.

How to Chase Off Foreign Investment and Destroy the Welfare of Your Nation

Hugo Chavez is threatening to instantly deport all automakers with production capacity in Venezuela if they do not immediately share their proprietary technology with local businesses. Things like this do not make for a inviting investment climate for potential new entrants and for existing companies may nullify threats of deportation as companies may decide to up and leave of their own volition. The only impetus for such idiocy in my mind would be a concerted effort on Chavez part to meet and overtake Zimbabwe's Mugabe as worst world leader.

Christmas Links

This is crazy, check it out. A high rise fell over intact in Shanghai.

A really interesting blog post about the future of cell phones, cell companies, and Google.

Johnathon Chait says Republicans screwed up by trying to defeat health care reform instead of influence health care reform. I agree!

Matt Yglesias agrees with Chait and makes the obvious but interesting observation that by not participating in the reform process "they gave all their leverage away to Joe Lieberman and Ben Nelson, so we wound up with some weird freebies for Nebraska." This should have been obvious to any casual observer but somehow was still lost on Mitch McConnell.

Ezra Klein channels Tom Harkin who thinks the Nelson deal (getting full federal reimbursement for Medicaid expansion) might lead to full federalization of Medicaid.

Auction Broadcast Spectrum

Presently broadcast television is allocated a certain/significant amount of spectrum, spectrum that could be used for other applications such as broadband. What is galling about this arrangement is that the government is conferring a scarce and hence extremely valuable resource for free. Mark Cuban suggests reclaiming the spectrum and auctioning it off. I wholeheartedly agree. In general, outside of reserving spectrum for first responders and for national security reasons I don't understand why the default presumption isn't to auction spectrum.

update: Whoops! I was hasty. Cuban also makes a good counter argument, along the lines of national security/emergency response, for why you wouldn't want to sell off spectrum. Anyhow, it's in interesting post, read it (all the way through I should say).

Google Chrome Now Available for Macs

Beta version here. Jiggity.

Tyler Cowen has a good post on the problems with mandates, namely, mandate creep:

"Breaking a three-day stalemate, the Senate approved an amendment to its health care legislation that would require insurance companies to offer free mammograms and other preventive services to women.

The vote was 61 to 39, with three Republicans joining 56 Democrats and the two independents in favor."

Tyler leaves unexplored what this means for the proposed IMAC/IMAB (the medicare board that is supposed to propose cuts which congress can vote up or down). Ezra Klein and other progressive bloggers consistently tout the IMAC as a central mechanism for cost control. That said, congress voted to include this benefit just as study was released indicating that the US's mammogram protocol is probably too extensive, and thus too expensive for the benefit conferred. Or in other words, that it doesn't pass muster with respect to comparative effectiveness. This was a controversial finding, and I don't have the capacity to know whether it is dispositive. But, it does highlight a tradeoff, the type of tradeoff that the IMAC board will be proposing, ostensibly in order to "bend the curve". To me this says, unfortunately, that the IMAC proposal has little potential of "bending the curve" as Congress will always be loathe to cut benefits (especially seniors' benefits).

AARP and AMA Endorse Health Care Plan

What meaning can one discern from these endorsements? This certainly indicates a greater likelihood for passage of health care reform. However, it is also indicative of what two important groups (Seniors and Doctors) perceive of the likely success of cost controls.

AARP

AARP's endorsement indicates that it thinks one of two things will occur: (1) the proposed medicare savings (which represent the majority of the cost savings in the health care reform bill) will not affect seniors care; or, (2) the congress will never pursue the cost savings proposed (a la the annual kabuki with provider reimbursement rate cuts). This may be cynical, but I think AARP envisions the latter not the former transpiring.

AMA

Health Care reform would represent a boon to doctors in that it would expand the market for their services. There would be 21 million new, paying customers which would increase their overall volume and also the prices they can command. In theory, this would be mitigated to some degree by Medicare reimbursement cuts and reforms; but I suspect, the AMA also recognizes that these aspects of the health care reform are unlikely to materialize.

An Interesting if Incomplete Narrative on Income Inequality

From Arnold Kling:

"I think that perhaps the most important trend of the past thirty years is the increased importance of cognitive skills relative to physical labor. Obviously, this has been going on for more than just the past thirty years, but during the past thirty years we saw an acceleration. This has had a number of consequences:

1. It changed the role of women. Their comparative advantage went from housework to market work.

2. This in turn, as Wolfers and Stevenson have pointed out, changed the nature of marriage. Men and women look for complementarity in consumption rather than in production.

3. This in turn leads to more assortive mating, with achievement-oriented men looking for interesting mates rather than for good maids.

4. This in turn leads to greater inequality across households. It also fosters greater inequality among children. The children of two affluent parents are likely to have much better genetic and environmental endowments than the children of two (likely unmarried) low-income parents.

5. Inequality is exacerbated by globalization and technological change. If your comparative advantage is basic physical labor, you have to compete with machines as well is with workers from the Third World.

The net result is an economy that has improved considerably for people with high cognitive skills, but which has improved only somewhat for people with relatively low cognitive skills."

There is one thing that this narrative leaves out: the top 1%. It does seem that when you are looking at that top 1%, which has been pulling away from the rest of the population, I think you see two trends: 1) a greater return for entrepreneurs as a result of lower startup costs and easier access to capital (a positive development); 2) eroding social norms relating to CEO pay generally and the finance industry as a whole thus enabling CEO/finance to extract greater rents from shareholders.

UAW's Game Plan

Labor is its own worst enemy. The UAW membership are killing a plan that their leadership negotiated with Ford management that was more generous than they obtained from Chrysler and GM (courtesy of Uncle Sam and their respective perverted and politicized bankruptcies). While Ford seems to be turning around and has a decent cash cushion, it also has a pile of debt and a decreasing though still significant burn rate. This seems quite foolish on the UAW's part. If Ford continues to be at a labor induced competitive disadvantage (compared to non-UAW manufacturers and now Chrysler/GM which are partially owned by the UAW) chapter 11 is likely in its future. There is a greater likelihood by that time that some entity other than Uncle Sam will be able to provide Debtor-in-Possession financing in which case it is unlikely that the bankruptcy proceedings will be tilted to the UAW's benefit as much as they were for GM and Chrysler.

Cowen on Mandates

Tyler Cowen has an article on the problem with the individual mandate. I think his point is valid but without a mandate you have a significant free rider issue. I have been going back and forth on which is better: buying across state lines or setting up a national exchange. The principal concern I have with a national exchange is that it will increase the prospect of regulatory capture by the AMA. If it is the only means of purchasing health care there is a risk that doctors will lobby congress to mandate benefits ultimately causing an increase in premiums. That said, a national exchange is better equipped to deal adverse selection since you could conduct an ex post risk adjustment on all providers on the exchange to ensure that insurers do not select only good risks.

Zingales on Gramm-Leach-Biley

Here is an interesting observation from Zingales:

"The real effect of Gramm-Leach-Bliley was political, not directly economic. Under the old regime, commercial banks, investment banks, and insurance companies had different agendas, and so their lobbying efforts tended to offset one another. But after the restrictions were lifted, the interests of all the major players in the financial industry became aligned, giving the industry disproportionate power in shaping the political agenda."

hat tip: Arnold Kling

My Prediction on Health Care

I think the bill will ultimately die. I think once it gets to the floor the amendment process will yield more extensive coverage benefits, reduced medicare cuts, and weakened pay-fors causing the bill to collapse in on itself.

Watching the VA Gov Debate

McDonnell seems like a car salesman but I think he will win. Deeds stutters. This is a fundamentally trivial observation but given that the average voter is completely arbitrary I think it is something that will cut against deeds at the ballot box.

Obama on the Nobel Prize

While I think this whole deal is absurd, I am always impressed at how classy Obama is. Here is the transcript:

Good morning. Well, this is not how I expected to wake up this morning. After I received the news, Malia walked in and said, "Daddy, you won the Nobel Peace Prize, and it is Bo's birthday!" And then Sasha added, "Plus, we have a three-day weekend coming up." So it's good to have kids to keep things in perspective.

I am both surprised and deeply humbled by the decision of the Nobel Committee. Let me be clear: I do not view it as a recognition of my own accomplishments, but rather as an affirmation of American leadership on behalf of aspirations held by people in all nations.

To be honest, I do not feel that I deserve to be in the company of so many of the transformative figures who've been honored by this prize -- men and women who've inspired me and inspired the entire world through their courageous pursuit of peace.

But I also know that this prize reflects the kind of world that those men and women, and all Americans, want to build -- a world that gives life to the promise of our founding documents. And I know that throughout history, the Nobel Peace Prize has not just been used to honor specific achievement; it's also been used as a means to give momentum to a set of causes. And that is why I will accept this award as a call to action -- a call for all nations to confront the common challenges of the 21st century.

These challenges can't be met by any one leader or any one nation. And that's why my administration has worked to establish a new era of engagement in which all nations must take responsibility for the world we seek. We cannot tolerate a world in which nuclear weapons spread to more nations and in which the terror of a nuclear holocaust endangers more people. And that's why we've begun to take concrete steps to pursue a world without nuclear weapons, because all nations have the right to pursue peaceful nuclear power, but all nations have the responsibility to demonstrate their peaceful intentions.

We cannot accept the growing threat posed by climate change, which could forever damage the world that we pass on to our children -- sowing conflict and famine; destroying coastlines and emptying cities. And that's why all nations must now accept their share of responsibility for transforming the way that we use energy. We can't allow the differences between peoples to define the way that we see one another, and that's why we must pursue a new beginning among people of different faiths and races and religions; one based upon mutual interest and mutual respect.

And we must all do our part to resolve those conflicts that have caused so much pain and hardship over so many years, and that effort must include an unwavering commitment that finally realizes that the rights of all Israelis and Palestinians to live in peace and security in nations of their own.

We can't accept a world in which more people are denied opportunity and dignity that all people yearn for -- the ability to get an education and make a decent living; the security that you won't have to live in fear of disease or violence without hope for the future.

And even as we strive to seek a world in which conflicts are resolved peacefully and prosperity is widely shared, we have to confront the world as we know it today.

I am the commander-in-chief of a country that's responsible for ending a war and working in another theater to confront a ruthless adversary that directly threatens the American people and our allies. I'm also aware that we are dealing with the impact of a global economic crisis that has left millions of Americans looking for work. These are concerns that I confront every day on behalf of the American people.

Some of the work confronting us will not be completed during my presidency. Some, like the elimination of nuclear weapons, may not be completed in my lifetime. But I know these challenges can be met so long as it's recognized that they will not be met by one person or one nation alone. This award is not simply about the efforts of my administration -- it's about the courageous efforts of people around the world.

And that's why this award must be shared with everyone who strives for justice and dignity -- for the young woman who marches silently in the streets on behalf of her right to be heard even in the face of beatings and bullets; for the leader imprisoned in her own home because she refuses to abandon her commitment to democracy; for the soldier who sacrificed through tour after tour of duty on behalf of someone half a world away; and for all those men and women across the world who sacrifice their safety and their freedom and sometime their lives for the cause of peace.

That has always been the cause of America. That's why the world has always looked to America. And that's why I believe America will continue to lead. Thank you very much.

FHA Bailout

It looks like the FHA will require a bailout. Here is a chart detailing their delinquencies.

Nobel Peace Prize

Barack Obama won. I think he won because he is not George Bush. I suspect that the American voter was the original intended recipient until somebody in the Nobel Committee realized that George Bush was term limited.

Update: Maybe he is getting the Nobel for sending more troops to Afghanistan?

Update 2: Some will point out that when Obama was nominated that he had only been in office for 12 days. Well, maybe those were a very eventful 12 days?

Update 3: Mickey Kaus has a novel suggestion: decline it.

Other People's Money

The graph above is very telling. Over the last thirty years out of pocket spending has fallen precipitously. In this same period health care expenditures have risen tremendously. The reason I focus on out of pocket spending is that it's absence is illustrative of two major definciencies in the health care system:

1. Administrative Inefficiency (at an absurd level): Adding third and fourth parties to a transaction typically raises the cost of said transaction

2. Perverse Incentives: When you are spending other people's money you are more prone to waste. In the health care context this is the equivalent of ordering expensive tests with limited value, brand name drugs were generic drugs are adequate, etc.

Electric Utilities

Brad Plummer has a fascinating article on utilities.

Great Brooks Column

As they say, read the whole thing.

Solar Decathlon

If you live in the D.C. area you should go to the mall and check out the Solar Decathlon on the mall. Here is a blurb on the Solar Decathlon:

To compete, the teams must design and build energy-efficient homes that are powered exclusively by the sun. The houses are required to:

• Be attractive and easy to live in
• Maintain comfortable and healthy indoor environmental conditions
• Feature appealing and adequate lighting
• Supply energy to household appliances for cooking and cleaning
• Power home electronics
• Provide hot water
• Balance energy production and consumption.

Universities around the country, and a couple from Europe and Canada, participate. Houses are open to the public on Oct. 9-13 and Oct. 15-18. Go check it out.

Washington Post Discovers the Wheel

WaPo has an enlightening article on homebuyer's preference for good schools. Groundbreaking. How does such an article get greenlighted?

Samwick on Health Reform

Andrew Samwick has a great post on health care. He discusses an issue that is what I think is a central issue in our high cost of health care but is rarely explored: why does health care operate in a manner so distinct from other markets.

More ACORN Fallout

Now that ACORN has been revealed as an insidious organization (funny thing how offering to aid someone in trafficking 13 year olds for prostitution will tarnish your reputation) people are starting to look at ACORN's other activities. Kathy Kersten suggests voter registration should be an area of interest (in a rare fit of non-Michele Bachmenesque batshit insanity). It isn't such a massive stretch to think that some of these fraudulent voter registration drives might have yielded...voter fraud, which in the context of an election decided by 380 votes is troubling.

Palin's Memoir

I almost want to buy this just for spectacle aspect of it. I sincerely hope that it was not ghost written. It would be the first political tract with a heavy use of LOLcats.

Believing Your Own Spin, pt. 2

Ezra Klein again:

"Atlanta: If it's so easy to save $500-600 BILLION on medicare (doesn't Obama say: we can cut payments for medicare by that much?) - then why don't they just pass that bill?

Are they saying there is that much waste in the program? Why are they holding that money hostage? If it's the lowest hanging fruit (they say it is, it must be true) - just pass whatever needs to pass to save that money. Would anyone vote against that bill? Really?

Ezra Klein: Oh yeah. Saving that money isn't the hardest thing in the world, but nor is it the easiest. A lot of politicians are willing to do it if they also get health-care reform out of the deal. But they're not willing to do it if it's not part of a trade.

I've said this again and again, if the Republican Party included real deficit hawks, they could make an incredible bargain here. They could rip up the employer tax deduction and create a powerhouse MedPAC board and much, much more. The fact that they're just crossing their arms and shouting "no" suggests they're not particularly worried about spending, after all."

He is right that the Republicans have largely limited their participation in the reform effort to say no, however, the one substantive idea that Republicans have offered is to rip up the employer tax deduction or cap it. This was a center piece of the McCain health care plan, and consequently became the target of a very effective (and opportunistic and shameless) attack ad by the Obama campaign. Obama and the unions have taken the employer tax deduction off the table, not the Republicans. This is unfortunate because it manages to achieve two very important things at once: 1. raise revenue; 2. Control costs.

Believing Your Own Spin

Here is Ezra Klein, a blogger I regularly follow, like, and disagree with:

"Portland: So, have YOU ever actually had bulls testicles, a la Padma? If not, would you??

Second question - why this 2013 start date for reform? That's a llllong time from now.... And do you think if this passes and the Republicans regain control of Congress before 2013 they can just undo it before it even starts?

Ezra Klein: I have not, but certainly would try them.

As for 2013, there are two answers. One is that it can't be implemented till then for technical reasons. I think there's more to this than people are giving it credit for. The second is that it makes hc reform look cheaper in the 10-year window, which helps for budgeting."

Ezra gives 2 of 3 reasons why 2013 is when a lot of the health care bill is slated to ramp up:

1. Implementation is actually difficult.

2. Postponing implementation is a budget gimmick used to keep the cost artificially low (if you only show expenditures in five years out of a ten year budget window the program will appear cheaper than it really is).

And what Ezra omitted.

3. 2013 is after 2012, an election year. In the event that the reform is unpopular people will not be able to express the dissatisfaction for several more years.

That is sort of an obvious one. When you omit something like that you might as well be on payroll.

More on Health Care

Johnathon Rauch has a satirical piece probing the absurdity of health care. It's a good, if saddening, read. It is still bizarre to me that one of the major objectives of health care reform is to incentivize more people to pay a third party to pay for predictable expenses. Current proposals will simply exacerbate this perverse trend.

Why Community Rating is Bad

Community rating is where an insurer would be prohibited from charging policy holders different prices on the basis of risk. It is viewed as an essential part of health care reform by progressives and even some conservatives. The motivation behind community rating is sensible, some people have conditions which they have no control over and when insurers consider said condition the price of a policy is likely to be unaffordable. This is unfortunately what insurers do. Some view this as sinister but it too is sensible.

An event that is likely to occur is not an insurable event. If I wanted to build a house in area where hurricanes hit annually and houses were frequently destroyed the only way for an insurer to make a profit (or stay solvent) would be to set my premiums at the level of an expected future payout. Otherwise, given the predictability of a payout, a premium any cheaper would essentially constitute a direct transfer of wealth from the insurer to me. However, the information conveyed by the premium price is valuable. It tells the prospective homeowner that unless the homeowner is able to build a house that can withstand repeated hurricanes (or frequently rebuild a house that can't) that building the house is probably not advisable or affordable.

If you allowed insurers to price their premiums on risks where the policy holder has control over, such as their weight, activities such as smoking or excessive consumption of alcohol, or indicators such as high cholesterol or high blood sugar you would provide policy holders with stronger incentives for healthier lifestyles. This is not to say that all policyholders would adjust their behavior but at the margins some would. This would not obviate the need for other insurance reforms such as guaranteed issue and renewal, prohibition on excluding policy holders with pre-existing conditions, catastrophic re-insurance, and ex-post readjustment. But it would lead to a healthier population and lower health care costs over the long term.

Partying Like it's 1994

Here is an article discussing the Senate Finance bill proposed...in 1994. It's amazing how similar the current bill is to the bill discussed then. I half wonder if the Baucus bill was a copy and paste job.

Obama's Speech

I didn't listen to the whole thing. There were aspects of it that were good, some that were innocous, some obnoxious. I love that health care reform is being billed as a free lunch. I actually agree to some extent, there is waste, fraud, and abuse in medicare and there are substantial savings to be gained. I just don't think it will happen and even if they did the savings are likely to be substantially lower than predicted. Some of those savings, such as cutting Medicare Advantage, aren't really "waste, fraud, and abuse" but cutting seniors benefits. Which is fine with me, but it is a misleading argument. I think the president deserves some credit for putting the individual mandate in there. That is an important part of health care reform and it is an unpopular part. The pay fors are stupid. This tax on insurers is absolutely absurd. The tax will be passed on to the consumer, so you might as well place it on the consumer. What I am afraid of is that the since the tax is opaque that consumers, such as public sector unions, will still insist on cadillac coverage as they aren't exposed to the full cost of coverage (you don't see the employers contribution on your pay stub) and thus will not achieve much if any cost containment (while deriving little revenue). This is just a stupid idea.

Increasingly I don't think that universal health care reform will happen. That said it's interesting to think about what a smaller scale reform package would look like. You can't really do community rating without a mandate. You can't do a mandate without subsidies. One area where you probably could get wide agreement would be on the national exchange. This would benefit those who live in states where real insurance (catastrophic) has been regulated out of existence. This wouldn't increase coverage much but it would be a significant step in the right direction. I could also see a cap on the employer exclusion making its way back into the conversation. I think what you would see is that the cap would be fairly high but not obscenely high and the tax exemption would be extended to everyone. This would be far from optimal policy but it would be an improvement nonetheless. The other thing I suspect would be part of a scaled down bill would be some form of medicaid expansion (more limited) and maybe a very limited tax credit for folks up to 300% of the poverty line.

Things that would be left out from current bills are: mandates (employer/individual); insurance reform (maybe with the exception of recission; that is probably happening regardless); anything involving medicare; any substantial pay fors (income surtax, taxing benefits; the goofy insurer tax); malpractice reform.

ONE LAST NOTE: I hated when he said it costs three times as much to buy health care on the individual market than as when your employer provides it. One might pay three times as much as their employer is not providing an premium contributions, but the cost is the same. If I have a plan through my employer that is $100 a month and my employer pays 2/3rds of the premium, the cost of the premium is still $100 a month, I just happen to pay directly $33 out of wages and another $67 (potentially) out of foregone wages. If I pay for a policy on the individual market the cost could be the same- $100 a month- but I would paying the full cost from wages. The difference is not cost but rather whether the policy is being paid for in the form of after-tax wages in the individual market or pre-tax wages/employer contributions(foregone wages). What you could say is that it costs more in relation to the tax advantage. If my marginal tax rate is 25% and I buy a policy in the individual market with $100 I would need to make $133 in before tax wages to pay for the policy. If I get my insurance through my employer the policy is paid for in pre-tax wages so that is a a real bonus (thus I would only need to earn $100 to pay for the $100 policy).

Worst Sports Column EVER!

See this. This may actually be the worst column ever, not just the worst sports column. By way of background, the column is directed at Jaycee Lee Dugard who was abducted when she was 11 and just recently freed from the clutches of her kidnappers 18 years later. In the interim she has had two children, so it seems safe to say that she spent a good portion of those 18 years getting raped. Anyhow, the columnist, Mark Whicker (you can email him here to tell him what a dumbass he is-mwhicker@ocregister.com) wrote an entire column on sporting events that Jaycee missed while she was kidnapped. This in of itself, while stupid, doesn't necessarily sound venal, but if you read the opening of his column he makes light of the whole situation. I don't know how this made it to print.

(hat tip- Megan McArdle

My Idol

Here is a great article on D.C.s best: Marion Barry.